Garnet Capital Advisors Blog

Community banks are embracing consumer lending, but continue to struggle to boost their market share.

Small community banks have been increasingly embracing the consumer lending realm, but are feeling the pressure to keep up with technological innovations that may be hindering their reach to borrowers, according to a survey of community bankers conducted at a conference held by the Federal Reserve and the Conference of State Bank Supervisors.

Yet community bankers are increasingly seeking to add more and more consumer loans on the books, despite such hurdles. Mortgages, auto loans, and credit card products are becoming increasingly popular among smaller community banks. However, they're struggling to boost their market share in these realms.

The Struggle to Keep Up With Technologically-Driven Lending Practices

In the meantime, online lenders are attracting consumers with their convenient digital technology platforms, and creating fierce competition for community bankers, particularly within the auto loan realm. Small community banks are struggling to hold their ground in a world that's becoming increasingly dominated by technologically driven lending platforms. That's exactly what more and more consumers want, and online lenders are providing it to them. Meanwhile, small community banks continue to fight to maintain their ground.

Traditional banks have historically been somewhat slow to embrace change, and the adoption and development of technology is proving to be a prime example. Small banks are simply moving too slowly to adopt new digital technologies.

In the U.S., consumer lending is a huge driver in the banking industry, which held a 71 percent share of the market last year. Small banks are looking for ways to increase their piece of the pie; perhaps forming lucrative partnerships with online fintech lenders could at least part of the solution. In areas like consumer lending, fintech companies have successfully shown value by innovating with digital technology and operating with flexible platforms. These are engaging features for community bankers who are struggling to keep up with what consumers want.


Smalls banks are struggling to keep up with technological demands and heightened regulatory scrutiny to increase their share of consumer lending.

The growing consensus among banking professionals is to build lucrative partnership models with online lenders to capitalize on technological advances in the industry, and inevitably increase their market share of consumer loans.

In order to keep up with fintech lenders, small community banks need to either partner up with them, or figure out how to come up with an innovative lending platform themselves.

Tight Regulations Continue to Hinder Small Banks

In addition to the technological issue, there's also mounting concern over more stringent regulations that could put an even tighter squeeze on small banks to beef up their consumer lending efforts.

Such heightened regulations have placed additional costs over the heads of small community banks in order for them to remain complaint, and the new mortgage disclosure regulations are also somewhat burdensome. There's also the concern over a threat of repercussions of future regulatory changes. Should regulators impose new capital requirements or more stringent underwriting regulations, small banks could be left on even shakier ground.

Heightened regulatory requirements are imposing a burden on small community banks, which can negatively impact their ability to serve their customers adequately, and make a decent profit. Community banks need to face strict standards when handing out consumer loans.

At the end of the day, small banks need to find ways to adequately serve their customers. That means taking measures to vastly improve their technological standpoint when it comes to how their customers do their banking, as well as putting the necessary efforts in place to ensure full compliance with industry regulations.

Loan Sale Advisors: Mitigating the Obstacles of a Lag in Technology and Heightened Regulatory Scrutiny

Small community banks certainly have their challenges, but with the assistance of a seasoned loan sale advisory team like Garnet Capital, such hurdles can be effectively turned into opportunities. At Garnet Capital, we can assist small community banks to mitigate the murky waters of more stringent regulations to maintain compliance, and foster healthy partnerships with the right allies to boost their technological standpoint.

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